Detroit: Chaos as usual

Rod Meloni discusses the battle over Detroit's financial future

Nothing is ever simple, quiet or straight forward at Detroit City Hall. Today was the classic example.

The day started with Moody’s Investors Service downgrading the city’s debt in four different cases involving roughly $2 billion. It’s a staggering number and one greatly worrying Moody’s. In its release it points out the city’s deteriorating cash position, meaning the city’s money runs out in the next month or so, could mean serious trouble. The mayor’s office says the downgrades were expected. True. But that does not change the fact it is something no city wants to have happen because it increases the cost of the debt load [if the city can ever pay it off!] and in any other city this would set off alarm bells. Strangely and sadly, not here! Many on City Council, starting with member JoAnn Watson, have little use for the ratings agencies. She even suggested the City of Detroit stop making debt payments at the council table today. She says they are the ones who helped turn out thousands of Detroiters on the streets during the mortgage meltdown that had the city leading the nation in foreclosures for months.

At the same time that release came out Judge William E. Collette held a hearing in Ingham County. There he threatened to hold State Treasurer Andy Dillon in contempt of court according to union organizer Robert Davis. Davis sued the State and the Governor’s Financial Review Team looking at the city’s finances claiming they did not follow the open meetings act. The Judge appears to agree with Davis and wants to hear from the Governor’s office, the Treasurer and City Council on how this current consent agreement process worked. At the hearing the Attorney General’s Office attorney wanted an extension to a hearing set for this Thursday on the Open Meetings Act issues. Judge Collette granted the extension until a week from Thursday, but then slapped an injunction on the consent agreement process preventing any contract [that’s what a consent agreement is] from being signed between the City and the Governor’s Office. In case you have not counted, a week from Thursday is March 29th. That is also three days past the Governor’s legal deadline for the Review Team to come up with a recommendation as to whether a consent agreement can be reached or an emergency manager needs to move into the mayor’s office. Uh-oh! That prompted the Governor’s office to tell Local Four today it will immediately appeal for a a stay of Judge Colette’s order. That would undo the ban on a consent decree if the Governor can get one. His spokesperson this afternoon saying saying the clock is ticking, “that time is of the essence and the city needs a solution”. It needed one yesterday not a week from Thursday! If the Governor’s Office can’t get that stay in the next day or two it intends to appeal Collette’s ruling in an appeals court. All the while, the clock ticks, the cash burns and Detroit’s future hangs in the balance.

Quick Clicks

Many City Council members were actually happy to hear about the Judge’s ruling. Upon leaving the session, member Joann Watson smiled broadly saying “I told you so”. Council member Kwame Kenyatta said “I think the Judge is doing what he should because our question has been from the very beginning where did this so-called consent agreement come from? Did somebody stay up late one night and just formed it? His point is the Review Team met with City Council members during its deep dive into the city’s finances. Davis, Watson and Kenyatta all say it was done behind closed doors, in violation of the Open Meetings Act. That is illegal and they believe all the work done during that time should be thrown out and re-done. Again, the clock ticks. The Governor’s Office says nothing of the kind is required. We’ll soon see. That said, the City Council and the Mayor’s office expect to continue working on either a consent agreement counter offer or a deficit elimination plan in the days to come. They’ve been working on the counter consent agreement in meetings between the mayor’s and council staffers doing the heavy lifting as to avoid more Open Meetings Act troubles. The mayor’s office put out a statement this afternoon saying it intends to follow Judge Collette’s order.

So now the City and the State are faced with competing legal challenges, legal deadlines looming and the larger and more important issue for the residents of the city; the cash burn goes on by the minute and there’s no more cash to burn. It’s a very ugly, very difficult and typically Detroit problem. There appears no good end can come from such a chaotic mess and there is likely to be more fuel thrown on the fire before all of this is over. Let’s hope all the parties involved can find a good way out somewhere.

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